Putting a price on climate pollution

During this past week, Canada adopted a federal tax on fossil fuels set to begin next year. This carbon tax targets fuel, production and distribution companies in provinces that don't have yet adequate climate plans of their own, including Saskatchewan, Ontario, Manitoba and New Brunswick.

With global prices varying from 2.5 US$ (in Estonia) to over 126 US$ (Sweden) per ton of carbon (CO2e), this federal tax falls in the lower range starting with a price of CAD$20 (approx. US$ 15) per tonne of carbon (more details under the price tab).

With the objective of making it revenue-neutral, 90% of the tax revenue will be refunded to households, while the remaining 10% will be used to support vulnerable sectors like schools, hospitals, Indigenous communities and small businesses. Although it might seem counterproductive, the effectiveness of the measure lies on the original higher costs. When gas is expensive, people find ways to buy less gas. In the broader sense if there is an economic incentive to pollute less, polluters such as production and distribution companies will do exactly that, pollute less by cutting emissions.